Federal Tax Clinic

As taxpayers file their federal and state income taxes for 2017, many are wondering what effects the federal Tax Cuts and Job Acts (TCJA) passed by Congress in December will have on what they will owe when they file returns for 2018. For low-income taxpayers, particularly those with children aged 17-23, those whose children do not have a social security number or who depend on public housing, and anyone who gambles, the questions are especially acute.

According to Keith Fogg, the Faculty Director of the Federal Tax Clinic at the WilmerHale Legal Services Center of Harvard Law School, some of the federal changes under TCJA are not going to be “helpful at all” to low-income individuals. In late January, Fogg was one of 15 experts selected to testify before the Massachusetts House and Senate Joint Committee on Revenue regarding the impacts of TCJA on low-income taxpayers.

Massachusetts does not automatically adopt the federal government’s tax code to determine state income tax rules, but rather picks and chooses which statutes it will apply at a state level. As a result, testimony by Fogg and his colleagues will be particularly crucial as state officials examine whether and how to adjust state tax codes in response to the federal tax overhaul.

Although the income tax cuts may go unnoticed, particularly by the lowest wage earners, there are other ways in which TCJA could directly and adversely affect the lives of low-income taxpayers.

Tax bill hits low income families hard

One of the changes about which Fogg is most concerned is the removal of the dependency exemption and the subsequent expansion of the child tax credit.

Prior to the passage of TCJA, parents could claim a dependency exemption of up to $4,150 for each child they were supporting financially. The effect of that exemption was simply to reduce taxable income, so parents would pay less in taxes.

However, under TCJA, the dependency exemption is gone, as part of an effort to simplify the tax code.

Consequently, to ‘make up’ for the loss of the dependency exemption, the child tax credit was increased from $1000 to $2000 under TCJA, and the level at which an individual or dual wage earners could qualify was increased.

The expansion in itself does not pose any problems for low-income families.

“Where it fails,” explains Fogg, “is when children do not qualify for the child tax credit.”

Indeed, while the dependency exemption covered dependent children up to age 23, the child tax credit only applies to taxpayers with children under the age of 17. As a result, individuals with dependent children aged 17-23 will lose out not only on the dependency exemption, but also on the child tax credit as well.

Yet “the problem of the mismatch between the loss of the dependency exemption and the child tax credit doesn’t only apply to children,” says Fogg.

In fact, it applies to any person who would have been claimed as a dependent under prior law as a qualified relative. Qualified relative dependents do not cause the taxpayer to receive the child tax credit. So anyone who was taking care of elderly parents or other relatives or who had unrelated persons living with them for the entire year will no longer receive any tax benefit for this support to others.

Noncitizen immigrants also hit hard

Another population disqualified from receiving the child tax credit are children without a Social Security number, who are overwhelmingly undocumented immigrants.

While documented immigrants are able to file for a Social Security number for their children –after they provide ID and their work-authorized immigration status with the application – undocumented immigrants are unable to do so. Barring those without a Social Security number from receiving the child the tax credit places many vulnerable noncitizen families at risk, with the issue again being exacerbated by the repeal of the dependency exemption.

Tax rules eliminate incentives for public housing

Additionally, an indirect aspect of TCJA that affects lower-income populations is the elimination of incentives for investment in public housing. The result of this is that those who need this assistance to cope with high prices in the housing market could face homelessness.

Gamblers beware

Finally, those who like to take the occasional trip to Foxwoods, as well as more serious gamblers, may struggle with alterations in the wagering laws introduced in TCJA. To illustrate the differences between TCJA and the previous tax code, Fogg provides the example of a gambler who wins a few thousand dollars then loses that same amount shortly thereafter.

In the past, that individual could report both his winnings and his losses when filing taxes. Now, with the repeal of miscellaneous itemized deductions in TCJA, the gambler can only report the few thousand dollars of winnings, while the equal amount that he or she lost is not taken into account in determining taxable income.

This may result in a significantly higher tax rate for frequent gamblers, many of whom are elderly or low-income.

Timeline for Massachusetts decision

With these changes in mind, the question becomes what Massachusetts will choose to do in response to TCJA’s passage.

Since the federal legislation affects the 2018 tax year instead of 2017, the state will have until next fall to come to a conclusion.

What sort of resolution would Fogg like to see?

Though admitting at this point that the details “are a work in progress,” he says he hopes Massachusetts lawmakers “will look at the broad issues stemming from this and create laws that will protect low-income taxpayers and ease some of the fallout from the federal tax rules.”

In December, Amy Feinberg ’18 became the second Federal Tax Clinic student to have the exhilarating experience of arguing an appeal in circuit court since the Clinic opened at Legal Services Center of Harvard Law School in 2015.

Clinical Professor of Law Keith Fogg, who directs the Federal Tax Clinic, notes that many attorneys can be practicing for 10 or more years before they get the kind of experience that Feinberg has gotten while taking the Clinic.

Other students have had the opportunity to file amicus briefs and help prepare appeals for court. All students work directly with clients and carry a docket of cases. And almost all have the opportunity to negotiate directly with the IRS and state tax authorities – experiences that many lawyers seldom get, even if they are tax attorneys.

“The opportunity to appear in the circuit courts, file amicus briefs, and to promote law change through policy advocacy if necessary is an outgrowth of a strategy that the Federal Tax Clinic has developed to assist taxpayers, many of whom are low income, who have missed the deadline to file a petition in the United States Tax Court by one or more days because of misleading information or notices sent by the IRS, “ Fogg says.

Learn more about Feinberg’s experience and the work of the Federal Tax Clinic on this issue here.

In a recent blog post, Clinical Professor Keith Fogg, Director of the Federal Tax Clinic at LSC, advocates for the IRS to ensure that low-income veterans who receive military retirement payments are protected from financial hardship under the Federal Payment Levy Program. To learn more, read Prof. Fogg’s post here.

The Boston Bar Association recently interviewed Daniel Nagin, LSC’s Faculty Director, about the first year of the Tax Clinic at LSC. Professor Nagin highlighted some of the Clinic’s accomplishments on behalf of low-income taxpayers, as well as the Clinic’s efforts to train private bar attorneys to provide pro bono assistance and increase access to justice. In describing the mission of the Clinic, Professor Nagin noted:

It is not uncommon for people who have tax problems to be afraid and unsure what to do—which can lead to people doing nothing and letting deadlines and opportunities to challenge IRS claims pass. Our mission is to eliminate barriers and increase access to help, to make it as easy as possible for people in these situations to get legal representation.

The Tax Clinic is directed by Keith Fogg, a Visiting Professor from Villanova University School of Law. According to Professor Fogg:

The Tax Clinic is excited for the opportunity to assist the Boston legal community in bringing access to justice to local taxpayers in need. We have had several successes for our clients and have built some important ties in the community both with organizations that refer clients and with tax professionals who have agreed to serve on our pro bono panel. Being a part of the Legal Services Center allows us to reach our clients in the community where they live. We are especially privileged to have the connection with the Veterans Clinic and to provide tax assistance to the veterans who have served us so well. As our founding fathers noted, taxation with representation works best.

You can read the full interview with Prof. Nagin on the BBA’s Beyond the Billable Blog here.

To help introduce the Federal Tax Clinic to the community, we are hosting an open house, catered lunch, and informational session at the Legal Services Center’s office in Jamaica Plain on Wednesday, July 29th, from 12:00-1:00pm. This event is for service providers who work with veterans, immigrant communities, low-income populations, VITA programs, and/or economic empowerment programs of any kind. At this event, we will describe in more detail the tax advocacy the Clinic will undertake, best practices for referring clients, and some of the most common legal issues taxpayers face. We’d love for you to join us. If you can attend, please RSVP online, call 617-390-2579, or RSVP via email to jcarvalho2015@clinics.law.harvard.edu.

Even if you are unable to attend our event, please feel free to contact us if you’d like to learn more about the Federal Tax Clinic or any of LSC’s other programs.

The Legal Services Center welcomes T. Keith Fogg as Visiting Professor of Law and Director of the Federal Tax Clinic. Professor Fogg is the preeminent tax clinician in the country and the leading voice on tax law, procedure, and policy for low-income taxpayers.

Tax Law Fellowship Opportunity: The Legal Services Center (LSC) of Harvard Law School seeks to sponsor an applicant for the Christine A. Brunswick Public Service Fellowship offered by the ABA Section of Taxation. The Fellowship funds an attorney position for two years at the host organization and supports advocacy on behalf of low-income taxpayers. Graduating law students, recent law school graduates, and judicial law clerks are eligible to apply for the Fellowship. More information about the Fellowship can be found here.

Deadlines: Applications for the Fellowship are due to the ABA Section of Taxation by November 14, 2014. Any persons interested in applying for Fellowship sponsorship from LSC are encouraged to contact us as soon as possible and well before the ABA deadline.

To Apply for Sponsorship: Please send a cover letter, resume, law school transcript, list of references and writing sample to Laura Johnston, Program Coordinator, LSC, via email to ljohnston[at]law.harvard.edu. General inquiries and questions can also be directed via email to Ms. Johnson.

* This website is neither a solicitation nor an offer to represent you concerning any legal problem. The information conveyed on this website is not intended to and does not create an attorney-client relationship with you and the Legal Services Center or any attorney at LSC. Please be aware that unsolicited letters, facsimiles or emails do not create an attorney-client relationship and we will not have an attorney-client relationship with you until and unless you and LSC enter into a formal agreement of engagement. Please do not send unsolicited emails requesting legal assistance.